Spreadex Market Analysis: US Stocks Trade Down, Awaiting Fed Meeting

AM Analysis – “European bourses opened calmly today” – Shavaz Dhalla
European bourses opened calmly today, in stark contrast to the windy weather in London, as traders decided to bet on U.S. policy makers holding off from tapering owing to weaker anticipated U.S. confidence data released last week. It seems with all the problems concerning the U.S. debt ceiling, replacing the head of the U.S. central bank as well as the stark disagreements between political parties which could adversely affect growth rates then perhaps there is a case for arguing that tapering would not be appropriate within the present context.

In addition, the buying in equities on the back of tapering not happening in the next FOMC decision is also causing Gold to drift around five-week highs. Clearly investors are concerned that the continuing use of quantitative easing to help support the U.S. economy will increase the rate of inflation and as a result diminish the value of cash. Interestingly however, the key buyer of Gold at the moment is India. Thus, whether the surge is a result of inflationary fears, or festivals like Diwali and Dhanteras occurring in November which typically spur Gold buying, is unclear.

PM Analysis – “US stocks are trading down this afternoon” – Alex Conroy
US stocks are trading down this afternoon with investors presumably positioning themselves for tomorrow’s Fed policy meeting. General consensus seems to be that the Fed will avoid tapering now until March following the recent government shutdown, disappointing September jobs data and the more dovish Yellen being announced as the next Chairwoman of the Federal Reserve. Expect volatility over the next couple of days as speculators attempt to forecast the outcome of the meeting and overreact to any announcements made.

Pending home sales came in worse than expected at 3:00 pm, actual results were -5.6% as opposed to the forecast 0.5% this is biggest slump in three years and further adds to a month of disappointing data. Bears will see this as further evidence that the economy is not yet in a position to introduce tapering and will position accordingly. It also would suggest that the positive economic data seen earlier in the year was in fact a false positive and further validates the Fed’s previous decision not to start tapering.

[The original articles by Spreadex can be found here.]

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